Gangs, inflation and political crises are bringing the Haitian economy to the brink of collapse

Issued on: 05/28/2022 – 03:50Modified: 05/28/2022 – 03:49

Port Au Prince (AFP) – With gas sales already subsidized by the government at a loss, the Haitian economy – vulnerable to incessant crime and political instability – appears on the brink of collapse as the war in Ukraine sends fuel prices skyrocketing.

The global rise in fuel costs comes at the worst possible time for Haitian authorities: Last December, they took the highly sensitive step of raising the price at the pump for the first time in five years – just two months before Russia invaded its neighbor.

Still well below the global average, Haitians today pay 49 US cents for a liter of gasoline and 84 cents for diesel.

Unsustainable fuel subsidies

The state pays the difference to the oil companies, and the gap between what the government pays for fuel and what ordinary Haitians pay at the pump has grown unbearably wide since the invasion of Ukraine sent world oil prices skyrocketing let.

“This year, these fuel subsidies have increased by more than 200 percent: that’s about 18 billion gourden,” or more than 164 million euros, said economist Kesner Pharel.

In cash-strapped Haiti, that’s a staggering sum, more than double the health ministry’s budget.

And it does nothing to alleviate the plight of the 60 percent of Haitians who live below the poverty line.

“That doesn’t help socially because it’s a general subsidy: we don’t target the most disadvantaged,” Pharel said.

“A mechanism was launched in December to support only the public transport sector, but so far this has not been implemented due to the state’s lack of efficiency,” he said.

And with the impoverished country importing five times more food than it exports, soaring sea transportation costs are exacerbating inflation, which topped 25 percent earlier in the year.

“We will suffer from imported inflation because our main trading partners, the United States and the Dominican Republic, now also have high inflation: we could hit 30 percent at home this year,” Pharel warned.

The specter of the 2008 food riots hangs over Haiti, while wheat prices are also soaring due to the Russian war in Ukraine, the two main grain-producing countries.

Flour price up by a third

“This is gradually affecting the entire production of wheat products in Haiti, such as flour or pasta, which have already increased by more than 30 percent since the war,” said economist Etzer Emile.

Lawyers are protesting outside Prime Minister Ariel Henry’s private home to force the government to move the civil court to a safer area of ​​Port-au-Prince in April 2022 amid rising gang violence in the capital Valerie Baeriswyl AFP

Haitian households spend 60 percent of their income on food, according to the National Statistics Institute, and even before war broke out in Europe, 4.5 million people were food insecure.

“This morning the children asked for bread for breakfast, but we couldn’t buy it: we replaced it with cassava pancakes, even if they don’t particularly like it,” said Michele, who lives with her in Port-au-Prince mother, sister and three nephews.

“You can’t buy as much rice as you used to. Besides, we don’t have any and are considering whether or not to buy more,” the young woman said.

And these economic challenges come as Haitian authorities are deeply paralyzed and no institution has the legitimacy to institute reforms.

Prime Minister Ariel Henry, appointed in early July, barely 48 hours before the late President Jovenel Moïse was assassinated, has still failed to rally the political class to form a consensus government.

A lack of elections has also reduced the Senate to a third of its size, meaning it can no longer achieve a quorum to hold a session or vote on a law.

The political vacuum has allowed powerful criminal gangs to gain territory and build unprecedented levels of funding thanks to the ransoms they receive from daily kidnappings, mainly in the capital, Port-au-Prince.

Businesses flee to the Dominican Republic

The mainstay of criminal gangs poses another obstacle to the recovery of the country’s economy, which has been in recession since 2019.

“More and more companies in troubled areas are shutting down with great violence, putting more people out of work,” Emile said.

However, Haiti’s economic slump is benefiting its neighbor greatly.

“Dozens and dozens of Haitian entrepreneurs have already immigrated to the Dominican Republic and they are just doing business here in Haiti,” said Gregory Brandt, president of the Franco-Haitian Chamber of Commerce and Industry.

“In the 2021-2022 fiscal year, Haitians invested $250 million in the Dominican Republic,” he said.

© 2022 AFP